AUD/USD finds intermediate support around 0.7050, risk-off mood still intact

  • AUD/USD has found an intermediate cushion around 0.7050, however, more downside is on cards.
  • Investors have turned risk-averse ahead of the release of the interest rate policy by the Fed.
  • A decline in monthly Australian Retail Sales might ease some troubles for the RBA.

The AUD/USD pair has managed to gauge an intermediate cushion around 0.7050 in the early Asian session. The Aussie asset has witnessed immense selling pressure and is showing a less-confident pullback move, however, the downside is still favored as the risk profile is still negative. Federal Reserve (Fed)’s monetary policy-inspired volatility has forced investors to dump risk-perceived assets vigorously.

S&P500 tumbled on Monday as investors are worried that further interest rate hikes by Fed chair Jerome Powell will escalate recession fears. Consumer spending will get trimmed, employment opportunities will get limited and producers might operate on the lower capacity to augment higher interest rates by the Fed. The US Dollar Index (DXY) delivered a breakout above the critical resistance of 101.80 and drove to near 101.90 as investors underpinned the risk aversion theme. Also, the return generated by 10-year US Treasury bonds scaled above 3.54%.

The Fed is highly likely to announce a hike in interest rates by 25 basis points (bps) to 4.50-4.75% as a significant decline in the Consumer Price Index (CPI) has infused confidence among Fed policymakers that the roadmap of achieving price stability in demonstrating desired results. Also, the street is expecting that the Fed might pause hiking interest rates after pushing them to 4.75-5.00% for the remaining year.

On the Australian front, investors are keeping an eye on Tuesday’s monthly retail sales data, which is expected to display de-growth of 0.3% from the prior release of 1.4%. This might ease some troubles for the Reserve Bank of Australia (RBA), which is struggling the cap the stubborn inflation in the Australian economy.

FX

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